Ways to Save

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WHAT'S THE POINT IN SAVING MONEY?

Saving money isn't just about keeping money off to the side to eventually spend on something bigger later.

It's also about having enough in your bank account:

• for a bank to see you would be a good suit for a loan.

• that you never need a credit card... ever!

• to be able to pay all your bills and all of them on time.

• to pay down debts easier and faster.

The essence of saving money is about having enough in your bank account to buy things when you need to, and waiting patiently for things you want without the need to borrow.

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HOW DO I SAVE MONEY BY PUTTING SOME ASIDE?

Set up several bank accounts as we show you HERE.

Name one of your accounts the thing you want to save for.

For example, "Cyprus holiday", "New tool shed", "Backyard pool", "New hairdo".

Choose how much you want to save per day, week, month, 3 months or year.

Ensure the number you have chosen is within your budget.

Can you afford to put in that much based on your income and other expenses?

If you can't, adjust for lower and choose to be patient just that little bit longer.

If you can afford more, adjust your number higher and save more a little quicker.

Set up a scheduled transfer from your "Money In" account on the day after your pay-day.

In the long run, planning for it in the future and saving bits per pay-day will cost you

less than getting it now on a credit card or personal loan.

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HOW DO I SAVE MONEY BY BUDGETING?

Budgeting ensures you distribute your income to all your bills, debts and expenses.

If you're not budgeting well, you could have your water, gas and electricity bills all come in at once. All three are done by quarters (every 3 months). If you're not on top of saving for them, this problem WILL occur 4x every year. And at the same time as all your normal bills.

Not controlling this puts you into a situation where you'll need outside credit just to pay everything. And once you take out a credit card or a personal loan to fix your problem, it will only be 3 months before you're adding the cost of 3 more bills to your growing debt.

Then the interest increases... and increases... and increases...

Then you can't afford the repayments.

If you do not budget well, you end up in a cesspool of debt that is extremely difficult to get out of.

To avoid all the above, use the Banking and Budget page to set everything up for yourself, then you can sit back, relax, and let your bank accounts automatically pay all your bills on time, every time.

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HOW DO I SAVE MONEY BY NEVER BORROWING?

Spend money that you actually have and you'll never pay interest.

Half the time you want to buy something right then and there, it's because of a sale, an event like birthdays and Christmas, or a life disaster. Because you haven't budgeted for it, you're tempted to use a credit card to make sure you have it as soon as possible while it's cheap.

The problem with credit cards is that - despite saving money on an on-sale item - you end up spending two, three, four times the cost of that item on sale because of the interest that accumulates, and which accumulates and accumulates and accumulates until the card is fully paid off.

The simple fact is, if you wait until you have the money, you won't owe more and more money.

As soon as you spend any money with a credit card, it actually makes it harder and harder to save, until you have zero savings, then you owe more than your income, then more, then more, then more.

Just never use one. This is easy to say when it's not a life disaster, but the point is, be patient if the thing you need is not life-threatening. That On-Sale item could cost far more than the original price in the long run.

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ROUNDING UP YOUR ACCOUNT TRANSFERS

The Banking and Budget setup we've provided for you provides a list of scheduled transfers you could set up with your bank.

See example below.

To save more in the long run - and further ensure you have money in your account WHEN the bills inevitably increase - you could round up the transfer amount.

Instead of transferring $15.56 per fortnight to your "Council Rates" Account,

transfer $16 or $20.

Instead of transferring $70 per fortnight to your "Private health" Account,

transfer $72.00 or $75 or $80.

Instead of transferring $3.84 per fortnight to your "Ambulance cover" Account,

transfer $4 or $5 or $10.

Instead of transferring $12.44 per fortnight to your "Doctors, dentist, etc..." Account,

transfer $13 or $15 or $20.

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STORE EXCESS MONEY IN ACCOUNTS

Loan lenders love when you have money just sitting in your account, whether it's there for any particular reason or not.

• It shows you can save.

• It shows you don't acquire debt.

• It shows you pay bills.

• It enables them to see very quickly that you are a great fit for a loan, whether home, car or personal.

So, along with with rounding up your transfers, seek to increase the excess in those accounts

merely for the sake of excess (or the inevitable day when an unexpected bill arrives in the mail).

It is good practice to keep double the amount of money in each account than the bill is worth.

If one account has an ongoing direct debit of $20 per fortnight, and you're transferring $20 per fortnight in to match…

Instead, round up your transfer to $21, $22 or $25, then return the transfer amount to $20 when there is $40 in the account.

If one account has an ongoing direct debit of $100 per fortnight, and you're transferring $100 per fortnight in to match…

Instead, round up your transfer to $105, $110 or $120, then return the transfer amount back to $100 when there is $200 in the account.

Best practice in budgeting would be to keep the round up going until you have a baseline of $1000 in that account before reducing.

You could round up all accounts with small amounts at once

OR

You could heavily round up one account at a time.

Once it reaches a $1000 baseline, you drop it back down to the budgeted amount, then move on to heavily increase the next account.

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WHAT DO I DO WHEN I GET A LARGE UNEXPECTED BILL?

If you have accumulated extra money (like keeping a grand in each account), use that chunk of sitting funds to pay your bill.

It's money you've already saved. Go for it! It stops you from needing to borrow from a bank or ever being tempted to use a credit card.

Just remember after to increase the round-up in that account so that you repay it back to the $1000 level. Then you're free to use it again when the next large unexpected bill comes knocking.

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SAVING MONEY AND PAYING OFF DEBTS

Saving money is also about paying off debts before you take on new debts.

The more debts you have, the more interest you pay, the longer it takes to pay off all those debts.

But… acquire only one or two debts at a time and pay them off before you spend big again.

This will save you sooo much money in the long run.

This is especially true for planning weddings and having children.

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PRE-MARRIAGE DEBTS

Weddings and honeymoons can be one of the most expensive months of a couple's life together.

If not planned well alongside the rest of your own personal budgets, couples can easily be stuck in debt after the wedding for years when it should be a time couples should be enjoying the freedoms of a life together before children enter the picture.

It is best to enter your first day after the wedding comparably debt free. The only reasonable debts to have on the first day as a married couple are your mortage and your individual HECS loans.

By all means get engaged whenever. But spend the time leading up to your engagement getting rid of all your debts.

• Pay off all your credit cards then cut them up, never to use them again.

• Pay off your car loans.

• Pay off your personal loans.

• Pay off your fines, your creditors, and any other debt to your names.

Then you can spend your debt-free, hard-earned wages on funding your wedding and honeymoon. Plan your wedding and honeymoon holiday dates, not around when feels nice, but around the length of time it will take for your savings and ongoing wages to pay for the wedding and holiday, without leaving further debts to pay off when you arrive back home.

The only debts left to your names when you walk down the aisle should be your mortgage and your HECS.

Start your marriage free of former worries, then, of course, you can start new debts together.

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PRE-CHILDREN DEBTS

The day you find out you are having a children will become the most expensive part of your life, and the expenses don't ever stop coming.

So, why would you start the most expensive time of your life already in debt?

Before you plan to conceive, get rid of all your debts.

• Pay off your credit cards then cut them up.

• Pay off your car loans.

• Pay off your personal loans.

• Pay off your fines, your creditors, and any other debt to your name.

And, most importantly...

• PAY OFF YOUR HECS.

Your student loan will keep growing and growing and growing.

If you believe it will take you 20 years to pay off your HECS without the indexation being added, you will find that - because of the added indexation - after 20 years, the amount you still owe will be the same as when you started, or even more!

The only debts left to your name when you child arrives should be your mortgage.

The same goes for when you plan for your second or your third or your fourth. Pay off every debt so you can afford the next truckload of expenses coming your way.